Wedge” System for Trading in Futures Contracts

Among the variety of graphical patterns formed by the asset charts, which can provide information to traders of the futures market on the trends of the movement of quotations, the most advantageous are patterns, the format of the construction of which allows you to determine as a continuation of trend movementsand price reversals to the construction of new trends in the movement of quotations. Today we will consider a classic example of such a universal graphical pattern “Wedge”.

“Wedge” as a forecasting tool has a rather diverse format of construction, so in order to identify all of its types as accurately as possible, let us consider in detail in practice all modes of building a pattern.

So, the “wedge” has two main types – downward and upward, and for the generation of predictions it is necessary to take into account the direction of the trend when forming the pattern. Thus, the ascending wedge on a rising trend has a triangle format, the angle of which is directed upwards:

This pattern occurs when the market can no longer move the price of an asset upwards for certain reasons. An upward wedge on a rising trend is a reversal trend pattern.

The descending wedge on a rising trend, on the contrary, indicates Continuation of the trend. In this case, the angle of the pattern will be directed downward:

Construction on the graphical pattern “wedge” on a downtrend has a similar format with the difference that here the turning will be a downward wedge:

And the signal for the continuation of the trend movement will be an uptrend pattern:

When executing contracts under this trading system There is a simple rule – always open positions upwards on the descending pattern format, and always open trades downwards on the ascending wedge.

To work comfortably with the strategy, to correctly identify the “Wedge” pattern, traders need a safe binary options terminalThe terminal will be available with graphical tools of technical analysis. Such a set of conditions and services is available on the high-tech terminal PocketOption. We also recommend you and such platforms of reliable brokers: Stars Binary, Binarium, INTRADE.BAR.

Additional conditions of work under the system

• Chart Timeframe – graphical patterns are formed on all major periods of trading charts, so you can work on this strategy on any timeframe. However, please note that futures trading has a highly dynamic mode of operation in the financial market, so we do not recommend using the system on charts with a period higher than M15, in order not to get a decrease in the dynamics of trading operations and capital growth
• Basic asset – When it comes to choosing the optimal asset, the system is completely universal and allows you to use any instrument available on your platform for trading.
• Trading time – when choosing the optimal time management it is worth considering certain difficulties in the identification of the technical pattern “Wedge”. In this case we are talking about the speed of updating of liquidity charts on the minimum frames – the problem is that in volatile markets you may not have enough time to place positions after the identification of a signal pattern, so we recommend you to use system at nightWhen the quotations of the main assets perform low-volatility fluctuations.

 

Trading rules

Buying CALL contracts

We use two technical situations to work up positions. The first – a downward wedge is formed on the growing trend. The contract itself is executed at the end of the price correction, which is expressed in the breakdown of the resistance level of the pattern.

The second situation is the formation of a descending wedge on a bearish trend, which indicates a soon reversal of the trend. The contract is opened when resistance is broken.

For PUT contracts

Here there are also two technical situations for the registration of positions. The first one is a downward wedge formed on the trend after the breakdown of support, which indicates the end of the correction, let’s make a contract downwards

The second technical situation – an upward wedge (reversal trend pattern) was formed on the bullish trend, after the breakdown of the pattern support we make a contract down.

 

Expiration

To determine as accurately as possible the periodicity of the expiry of trading positions, you must take into account several indicators: the current volatility of the market and the periodicity of the timeframe of the chart. The best option for intraday trading would be to use contracts with 5 minutes expiration time on the timeframe of the chart of 1 minute.

 

Strategy profitability

Graphical patterns, including “Wedge”, have the highest rates of signal profitability. On average, more than 80% trade forecasts generated by the strategy give positive results. Thus, with this format of analysis we get high dynamics of growth of the operating capital.

 

Money Management

Trading operations for this strategy have a fairly high dynamics, so to create the most effective conditions money management We recommend to execute contracts with the volume of not more than 3% of the capital amount. Thus, you will be able to use signals on other trading instruments and make packages of contracts, thereby increasing the overall indicator of the strategy’s financial performance.